Are you “too hungry to eat?”
Knowing what your product or service really costs to provide is crucial. Could this tech industry legend have the right advice for your business?
Some people would claim small business owners are born with a streak of greed and look for every opportunity to jack up their prices to the detriment of the public. Whoever wrote that philosophical bit of nonsense probably hasn’t spent much time on Main Street, America.
It certainly isn’t the situation that CEDF business advisors normally see. In fact, a more typical conversation involves begging a reluctant business owner to consider an increase, having gone, sometimes, years without any adjustment. Could an argument be made that inflation is low in this country and has been for some time? Witness the official government inflation figures and the resulting minuscule cost of living increases for Social Security recipients.
But most CEDF clients have seen inflation in rents, insurance, the costs of materials, the minimum wage, and many other mandates that impact their businesses.
Marc Andreessen, the founder of Netscape, was quoted in a brief article in Business Insider with advice for (presumably tech) startups. But his words are just as relevant for small business owners in general — Raise prices.
He labeled the problem “too hungry to eat.”
“They don’t charge enough for their product to be able to afford the sales and marketing required to actually get anybody to buy it. And so they can’t afford to hire the sales rep to go sell the product,” he said.
This holds true beyond beyond Silicon Valley. Sometimes the reason for inaction is lack of research about competitors. Customers are unlikely to tell you that your competitors charge more. Sometimes the reason is actually low self-esteem. The owner is struggling and fears losing customers if prices are raised to an appropriate level. Whatever the reason, the best advice is: Snap out of it.